Microenterprise as a Recovery Strategy for Local Communities

Disclaimer 2 The views expressed in this presentation are the views of the speaker

Self-employment data 3 �The BEA classifies total full- and part-time employment into two major

For some long-term unemployed, selfemployment may be a viable alternative 4 �Over time, more

Share of Self-Employment as a Percent of Wage-and-Salary Employment, 1969 -2009 6 30% 3.

Self-employment as a Percent of Total Employment, 2008 7

8 40000 35000 30000 25000 20000 15000 10000 5000 0 1969 1972 1975 1978

Self-employment and Local Economic Performance 9 �Are regions or local communities better off with

Recent Research on Effects of Entrepreneurship 10 Study Measure of entrepreneurship Geography Measure of

Research Findings 11 �Measures of entrepreneurship has a strong and positive impact on state

Implications of Research Findings 12 �Self-employment is not a temporary phenomenon observed until the

Opportunities for Policy and Practice 13 �More technical assistance and credit access to increase

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Microenterprise as a Recovery Strategy for Local Communities 1 TODD GREENE FEDERAL RESERVE BANK OF ATLANTA MAY 1, 2012

Disclaimer 2 The views expressed in this presentation are the views of the speaker and do not necessarily reflect the views or policies of the Federal Reserve Bank of Atlanta or the Federal Reserve System.

Self-employment data 3 �The BEA classifies total full- and part-time employment into two major categories: Wage and salary jobs and Number of proprietors (work for themselves and often time employ others in their businesses) � Further classified as farm proprietors and NFPs �Proprietors Sole proprietorships and the number of individual business partners not assumed to be limited partners �Some of the individuals who are proprietors may also be employed by someone else

For some long-term unemployed, selfemployment may be a viable alternative 4 �Over time, more people in the U. S. have turned to self -employment as a source of income. The long-term trend has revealed a remarkable labor market phenomenon in the U. S. Self-employment has surged in the last decade and will continue.

24. 19. 0 05 5 26. 19 0: 0. 0 05 0: 0 5 28. 19 0: 0 05 0: 0 5 30. 19 0: 0 05 0: 0 5 0 01. 19 : 0 0. 0 6. 5 0 : 00 03 19 : 0. 0 05 0: 0 6 05. 19 0: 0 05 0: 0 6 07. 19 0: 0 05 0: 0 6 09. 19 0: 0 05 0: 0 6 0 0 11. 190 : 00. 0 6. 5 0 : 00 13 19 : 0. 0 05 0: 0 6 0 15. 19 : 00 0. 0 05 : 6. 0: 00 1 17 0 9. 0 05 0: 0 6 0 19. 19 : 0 05 0: 0 6 0 21. 19 : 0 05 0: 0 6 23. 19 0: 0 05 0: 0 6 25. 19 0: 0 05 0: 0 6 0 27. 19 : 0 05 0: 0 6 29. 19 0: 0 05 0: 0 6 0 01. 19 : 0 05 0: 0 7. 19 0: 0 0 05 0: 0: 00 00 : 0 0 05 22. Millions Self-Employment and Wage-and-Salary Employment, 1969 -2009 5 200 Source: Northeast Center for Rural Development, 2011 180 160 140 120 100 20 0 Selfemployment 80 60 40 Wage-andsalary employment

Share of Self-Employment as a Percent of Wage-and-Salary Employment, 1969 -2009 6 30% 3. 5% avg. growth Source: Northeast Center for Rural Development, 2011 25% 20% 15% 1. 4% avg. growth 10% 1959 1969 1979 1989 1999 2009 2019

Self-employment as a Percent of Total Employment, 2008 7

8 40000 35000 30000 25000 20000 15000 10000 5000 0 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 This raises the question of whether self-employment has any local economic benefits for the economy, in terms of stimulating incomes, wage and salary employment, or lowering poverty. 45000 Earnings ($/year Growth in Selfemployment has not been matched by increase in income for those proprietors 50000 Average wage and salary disbursements Average nonfarm proprietors' income Source: Bureau of Economic Analysis, 2011

Self-employment and Local Economic Performance 9 �Are regions or local communities better off with higher numbers or shares of self-employers? Does per capita income in localities grow faster when they have a higher percentage of self-employers? Does total employment increase when more people in the locality are self-employers? Are localities with higher percentage of self-employers able to reduce poverty rates?

Recent Research on Effects of Entrepreneurship 10 Study Measure of entrepreneurship Geography Measure of economic performance Deller and Establishments that Mc. Connon (2009) employs 1 -4 employees (County Business Patterns data from the Census Bureau) US States Employment and income growth Goetz et al (2011) the Kauffman Entrepreneurship Index (KEI) US States Employment growth Rupasingha and Goetz (2011) The share of nonfarm proprietorships (Bureau of Economic Analysis data) US Counties Employment and income growth and change in poverty

Research Findings 11 �Measures of entrepreneurship has a strong and positive impact on state income and employment growth. �Self-employment has a strong positive impact on income and employment growth in both metro and nonmetro counties. �Self-employment has a strong negative impact on poverty in nonmetro counties but no statistically significant effect in metro counties.

Implications of Research Findings 12 �Self-employment is not a temporary phenomenon observed until the economy recovers. It is growing and likely here to stay. �Policymakers should consider increased attention to this new workforce reality. �Policy and educational programs directed at improving the productivity and earnings of the selfemployed may possibly impact local economic growth and opportunity.

Opportunities for Policy and Practice 13 �More technical assistance and credit access to increase productivity. �Access to general business services. �Help with other issues such as healthcare, taxation, and data collection. �Provide programs that stimulate the entrepreneurial culture of a community. �Research needs to be done on what self-employed need in order to be successful.